The Community Preservation Corp. (CPC), a nonprofit affordable housing lender for the New York City area, is finally getting rid of its spreadsheets. The company has partnered with IBM on a new construction loan processing software that should make the process more efficient—and help borrowers get their money more quickly.

Laying the Groundwork
Two years ago, CPC began replacing its outdated approach by working with a software developer to come up with a proprietary system. IBM came aboard last June to enhance the software, and the end goal is for CPC and IBM to bring the software to market. The hope is that the software will make it more feasible for more lenders to offer construction or rehabilitation financing to smaller properties.

“Like many construction lenders, we operated for many years with each loan handled on its individual spreadsheet,” says John McCarthy, executive vice president at the New York City-based CPC. “It’s a very cumbersome and costly process because for accuracy and internal control, you have to have highly skilled people reviewing each spreadsheet.”

One of the main benefits of the new software is that it significantly reduces processing time. Like most lenders, CPC funds construction interest as one of the line items in a construction loan. When that process is done on spreadsheets, it takes about two days for the company to do the interest advances—with the new software, it now takes about one hour.

“This reduces the costs of doing construction loans for smaller buildings,” McCarthy says. “It will make that market more accessible, not just to us, but conceivably to other lenders as well.”

In the past, borrowers who wanted to know when their construction advance was coming would often have to contact the loan officer, who called somebody in servicing and waited for an answer. This system would provide that data instantly.

Going Green
One component of IBM’s work is to help CPC better manage the metrics around its new green financing initiative. In the fall, CPC, along with Freddie Mac, announced a new green financing initiative. Freddie Mac plans to use the metrics gathered through the effort as a basis for an upcoming green rehab mortgage program.

Lenders have shied away from offering green mortgages since there is no credible database of metrics to draw from. How could a lender underwrite NOI savings from green rehabs if they don’t really know what those savings will be? This software will be able to capture individual trade payment breakdown items, such as what kind of boiler was used, and measure the effects.

“We’ll collect the building fuel usage data before the rehab and the same data after the rehab,” McCarthy says. “The database should enable analysis to establish a correlation between particular rehab scope items and changes in energy consumption.”

The application interfaces with the industry standard commercial loan application, McCracken’s Strategy software. “If there are commercial opportunities with CPC to bring this software to their peers, we will definitely assist them in making the application portable and packaging it in a way so that it can be implemented elsewhere,” says Jerome Dumaine, a partner in IBM’s Global Business Services.